What does split means in stocks

In the context of stocks, a split refers to a corporate action in which a company increases the number of its shares by issuing more shares to current shareholders. This is done to boost the stock's liquidity, which is the ease at which the stock can be bought and sold in the market. A split does not fundamentally change the company's value, but it does increase the total number of shares outstanding. The most common split ratios are 2-for-1 or 3-for-1, meaning that shareholders receive two or three additional shares for every share they held before the split. The stock price is also affected by a split, with the price per share being reduced proportionally. For example, in a 2-for-1 split, the share price will be halved. However, the market capitalization, which is the total value of the company's shares outstanding, remains unchanged. Sometimes, companies engage in stock splits to make their shares seem more affordable and increase their liquidity. This can also lead to a share price increase in the short term, as small investors perceive the stock as more affordable and drive up demand.